Why Investors Can’t Count On Consumer-Spending Rebound

Despite some signs of improvement in the jobs outlook, investors might want to hold off on jumping into consumer stocks.

Normally, the more people who find work, the more money they’ll have to spend on consumer goods. But the expected recovery in the services industry—which makes up the bulk of the US economy—is likely to be in lower-paying jobs rather than the high-end financial industry.

For that reason, market pros say investors shouldn’t count on the consumer but look instead at companies with a broad international presence and strong exports.

“You’ve got to be real careful in investing in the bread-and-butter US company that relies on consumer demand,” says David Twibell, managing director of investments for Colorado Capital Bank in Denver. “We still have a long way to go before most consumers feel like they are in a position to go out and spend.”